Equity Analysis /

True Corp PCL: Nadir of 1Q22 service revenue; recovery seen from 2Q22 on

  • Nadir of service revenue in 1Q22; strong bounce expected in 2H22

  • Shallower core loss expected for the rest of the year

  • Amalgamation process for creditors approval to progress well

Prasit Sujiravorakul
Prasit Sujiravorakul

Equity Research Analyst

Bualuang Securities
25 May 2022

Despite the weaker-than-expected 1Q22 service revenue, we see positive signs of an uptick in 2Q22 and wider scope for QoQ growth is expected in 2H22. In light of this, we anticipate shallower net and core losses for the rest of 2022, led by improved service revenue and a bigger cost reduction arising from the continued cost restructuring efforts. Our TRADING BUY stands, based on a shallower core loss in 2Q-2H22, the amalgamation progress and its synergy values. Our YE23 target price of Bt6.75/share includes DCF-based synergy values estimated at Bt0.97/share of TRUE. 

Nadir of service revenue in 1Q22; strong bounce expected in 2H22

Although the group’s service revenue in 1Q22 had been impacted by weaker macroeconomics caused by the rising cost inflation (which has further dampened consumer spending power) as well as the heightened mobile competition for the lower-priced packages, we think that its service revenue looks set to bottom out in 1Q22 and will recover QoQ in 2Q22 through 2H22. The easing of the Omicron spread and the greater country reopening for tourism in May-Jun will spur service revenue recovery in 2Q22 through 2H22. Moreover, if the chip shortage problem is resolved in 2H22, it will boost a bundling of service packages with the more affordable 5G devices and open for 5G monetization opportunity.